Exchange of Contracts doubts/risks for a non-complete new build

nejmen

New Member
Mar 3, 2011
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Hi there,

I am a first time buyer and found a new build flat (estimated completion: June, which it looks a bit optimistic for me) I would like to go for.

Apart of the reservation fee (all clear here), I am required to exchange contracts within 21 days (is it normal this “urgency” when the flat is not ready?) and put there a deposit of 10% of the property value (which I also understand is common practice) on the solicitor’s holding account

The developer “encourages” me to use one of their solicitors, as if I do so I would get some flat fittings/extra for free plus their solicitors already are up to speed with the procedure for this particular development.

Here is where my doubts came…

• As per the 10% deposit on the solicitor´s holding account, do I get any receipt/proof from the solicitor that that payment is a deposit for a new property? In case things go wrong, they are suppose to give it back to me but they could always argue the payment was for “something else” (unless I have some kind of contract/receipt)
• Once I put that money on the holding account, can I get it back if something happens before the 21-days exchange?
• My mortgage AIP agreement in principle is valid for 3 months, so if the developer completes after June, I have to request a new mortgage. What happens if I don´t get the mortgage by then? (worst case scenario, I know) I guess I would lose my money (10% deposit), wouldn’t I?
• If by any reason the developers (it’s a large firm, but nowadays no one is safe) go bust and can´t complete the building, what happens to my money?

Any recommendation/advice on this would be helpful!

Thank you